Konstantin Krutilnikov on the purchase by UCP Foundation of the companies owned by the VKontakte founder Pavel Durov

8 April 2014


United Capital Partners Foundation (UCP) of Ilya Shcherbovich has declared itself an owner of several companies connected with the web messenger Telegram created by the founder and CEO of VKontakte Pavel Durov. UCP controls 48 per cent of the largest Russian social network and is ready to sue Pavel Durov and the controlling owner of Group to demand that Telegram be delivered to VKontakte. Group in response promised to challenge the very fact of the UCP’s purchase of the Vkontakte’s share and called the acts of the foundation as to Telegram the classic greenmail.

UCP purchased three companies that “operate some aspects of the Telegram bsuiness” in order to transfer them to Vkontakte, told UCP yesterday. The suits are filed with the Eastern-Caribbean High Court and High Court of Justice of the Virgin Island, clarified the UCP representative Nafisa Nasyrova. The main issue of the plaintiffs is that all the same: Pavel Durov, being the CEO and the founder of Vkontakte started the development of the product in competition with the social network, that is the messenger Telegram on the basis of the protected protocol MTProto invented by Pavel Durov’s brother Nikolay who has been, until recently, the technical director of Vkontakte.

There are three companies: Telegram LLC, Digital Fortress and Pictograph, says Ms. Nasyrova, although denying to disclose any details. An informed source said that the former international operations assistant of Vkontakte Axel Heff was the seller. Telegram LLC owns the trademark of the messenger and stands in the contract with Apple for the iOS application. Digital Fortress (DF) carries out the management and financing of mobile applications. Group in response will be challenging in the London arbitration tribunal the legality of the purchase by the UCP of 48 per cent of Vkontakte from Vyacheslav Mirilashvili and Lev Leviev, formerly the partners of Pavel Durov, in April 2013. A company out of the group of Bullion Development Limited (Bullion) sued the UCP-controlled companies – Blesmir Development Limited and Palagon Limited. In violation of all contracts, in a manner disguised from the other Vkontakte shareholders and the management thereof, a foundation unknown to the web industry carried out a hostile intrusion into the board of our company by acquiring 48 per cent of its stock – this is how Durov explained the gist of the suit towards the UCP on his personal Vkontakte page. The deal was carried out in violation of the contracts in force, that require the Vkontakte shareholders first to offer their shares to the other existing shareholders. I have repeated that many times and would repeat it now: the 48 per cent share purchase was illegal and the UCP foundation is not a legitimate shareholder of Vkontakte.

The UCP suit will be considered in the BVI court for about a year, as lawyers say. “We are looking at the suit. At the first glance the UCP’s allegations seem to be unfounded”, - say the Group representative Ksenia Chabanenko. “This is an example of classic shareholder activism, or otherwise the greenmail. Out of nothing, they are trying to create serious problems to the strategic shareholders and good faith managers in order to receive a kickback.” – says the member of Vkontakte board (the representative of Bullion Development Limited) Georgy Azarov.

"First, Pavel Durov said that by himself that he did not sell the asset to the UCP. Second, these deals are clearly not common for friendly engagement of investments. Such deals are much more common for corporate raiding. Another argument in favor of the theory of “bad faith purchase” of the asset is the fact that neither Pavel Durov himself, nor his brother Nikolay were the seller” – notes the partner of S&K Law Offices Konstantin Krutilnikov.

If the shareholder priority clause is contained in the shareholders’ agreement then the chances for victory in court are quite high, - considers the partner of Bartolius Law Offices Yuliy Tay. Per his words, an action claiming a violation of shareholder’s priority rights entails a relief of transferring the rights to the shares from the purchaser to the plaintiff; “in such a chase will be obliged to pay for the shares the same amount as the UCP did”. In accordance to various assessments, the whole Vkontakte’s value was around 1.5-2 billion USD, therefore the 48 per cent of the company might have cost 720-960 million USD. If the transfer of shares onto the plaintiff won’t be possible, then in case of the court’s holding in favor of the plaintiff it could ask to compensate damages, payable not by the purchaser but by the sellers, since it was them who violated the shareholders’ agreement.” – Yuly Tay conludes.

Roman Ъ-Rozhkov, Anna Ъ-Zanina

Газета "Коммерсантъ" №59 от 08.04.2014, стр. 1

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